This article first appeared in The Edge Malaysia Weekly on July 8, 2024 - July 14, 2024

It was announced last week that China Communications Construction Company Ltd (CCCC), the main contractor for the 665km East Coast Rail Link (ECRL), which is being built at a cost of RM50 billion, will bear the operational risks of the rail together with its asset owner, Malaysia Rail Link Sdn Bhd (MRL).

Transport Minister Anthony Loke explained that CCCC and MRL are looking to form a joint-venture company to operate the railway assets of the ECRL, based on a renegotiated contract aimed at sharing the risks of the project, to reduce the financial exposure of the Malaysian government. The ECRL, which is slated to connect Kota Bharu in Kelantan to Port Klang in Selangor, is more than 67% completed, with the target for completion being at end-2027.

From Loke’s statement, it is understood that if the ECRL’s operations are profitable, MRL will receive 80% of the profit while CCCC will get the remaining 20%. However, if the ECRL incurs losses, the two parties will share the losses equally. Loke was reported to have said, “The cabinet gave the green light to the establishment of OpCo (operating company) in last week’s meeting … I have instructed MRL to finalise the agreement, which will be signed by December this year.”

In 2019, MRL had stated that the partnership between CCCC and MRL would not involve any form of ownership of the ECRL by CCCC, and that the arrangement was purely to share management, operation and maintenance costs, and exchange of technical know-how and expertise.

What is the reason for this change in plans?

Let’s not forget that ECRL has a chequered past. Its construction costs were inflated by a substantial amount to plug holes and help cover the shenanigans at 1Malaysia Development Bhd.

Considering ECRL’s history, it would be best to lay everything on the table.

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